Big Changes to How Businesses Record Revenue: What You Need to Know About FRS 102 Revenue Recognition Amendments.

5th Sep 2025

Table of contents

Introduction
What’s Changing?
Who’s Most Affected?
What Should You Do Now?
How Wright Vigar Can Help

As of January 2026, UK businesses will need to follow new rules for how they record income in their accounts. These changes come from an update to FRS 102, the accounting standard used by most UK companies. If your business sells products or services, especially under contracts, this could affect how and when you report your earnings.

Here’s a simple breakdown of what’s changing, why it matters, and what you should do next.

What’s Changing?

The old rules focused on when the risks of a sale passed to the customer. The new rules focus on when the customer takes control of what you’re selling; whether that’s a product, a service, or a mix of both.

To help businesses apply this, the new rules introduce a five-step process for recognising revenue:

Is there a contract?
You need a clear agreement with the customer that has real business value.
What are you delivering?
Break down the contract into separate parts, for example, setup, delivery, support, and treat each as its own item.
What’s the price?
Work out the total amount you expect to be paid, including any discounts or performance bonuses.
How do you split the price?
Divide the total price across each part of the contract based on what each is worth.
When do you record the income?
You record income either gradually (as you deliver) or all at once (when the customer gets full control).

Who’s Most Affected?

Service-based businesses (like consultants, agencies, or professional firms): You may need to split your services into parts and record income differently.
Businesses with performance bonuses or discounts: You’ll need to estimate these upfront and adjust later.
Companies with long-term contracts: You’ll need to decide whether to record income gradually or all at once.

What Should You Do Now?

Here’s a simple action plan:

Review your contracts
Look at how you charge customers and what you promise to deliver.
Talk to your accountant or finance team
They’ll help you understand how the new rules apply to your business.
Update your systems
You may need to track income in more detail or change how your software handles contracts.
Plan for the transition
You can choose to apply the new rules to past years or just start fresh in 2026. Each option has pros and cons.
Communicate with stakeholders
If you report to investors, lenders, or a board, let them know how your numbers might change.